Nigeria’s journey to a cash-lite economy with mPOS


Nigeria is pushing towards a cash-lite economy. How are mPOS solutions and value-added services helping merchants during this transition?

Countries all over the world are embracing the move away from physical currency towards a cash-lite society. From online purchases to digital payments in stores, the e-commerce revolution is set to soon affect all areas of daily life.

While this trend is common in the world’s economic powerhouses, new countries are setting their sights on an ambitious transition to digital commerce. Nigeria, one of the most prominent countries making a concentrated effort to go cash-lite, is making massive strides forward in the realm of mobile payment infrastructure.

Daniel Akumabor, country manager for GoSwiff in Nigeria, shared his insights on the state of mPOS and digital payments in Nigeria, and how challenges and opportunities in the country are shaping this voyage.

Mapping out Nigeria’s economic journey

Nigeria is an interesting proving ground for mobile point-of-sale (mPOS) solutions. According to the United Nations (UN) World Population Prospects report, Nigeria has the most rapid rate of population growth out of the world’s 10 largest countries. Projections show that it will move from the seventh largest country in 2015 to the third largest in 2050, at which point it will surpass the population of the United States.

Demographic trends are behind this growth potential, largely due to the fact that 44 per cent of Nigerians are under the age of 15, according to the report. As such, the country’s younger population will shape the future of mobile payments in Nigeria.

“It’s a bit misleading if you use the current trends today as a yardstick for what will happen in the next couple of years because it’s skewed in favour of the older generation,” Daniel said.

He noted that, as the younger generation sees more financial empowerment, payment systems will begin to cater to their expectations in commerce. Nigeria, and by extension the rest of Africa, is changing now – and at a rate much faster than the rest of the world expects.

The desire for digital payment services

One of the biggest challenges for mobile commerce in Nigeria is also one that has engendered a highly innovative domestic market. Daniel noted that the big global players have, traditionally, been slow to move into African countries – they often focus more on growth in Asia Pacific and the Middle East. As a result, this creates a vacuum in the mobile payment sector that local entrepreneurs are eager to fill.

As the world is a much smaller place, Africans are travelling and experiencing mobile payment services. When they return home, they bring that demand for digital commerce with them. That creates an opportunity for people to innovate, develop and implement those services.

“But that ends up with a really fragmented mobile payment space,” Daniel said. “You have a lot of little companies doing wonderful stuff, but not with enough critical mass to cover the country.”

When it comes to mobile payments in particular, that critical mass will be essential as more merchants come to demand this and other related services. Smartphone penetration, essential for a successful rollout of mPOS solutions, is relatively high in Nigeria – and there’s plenty of opportunity for growth. According to International Data Corporation (IDC), almost 15 per cent of smartphones shipped across Africa in the first quarter of 2015 were sold in Nigeria.

Much like Daniel noted with the role younger Nigerians will play in shaping the country’s economic future, that segment of the population is leading the way with smartphone adoption, as indicated by data from Pew Research Center. Ownership rates are higher among the younger generation; 27 per cent of all Nigerians surveyed have a smartphone, compared to 34 per cent of those from 18 to 34.

Trends in smartphone penetration and the desire for digital payment opportunities make it clear that Nigeria – as well as other countries that are transitioning to a cash-lite economy – only require the right industry involvement to unlock the full potential of mPOS.

Making value-added services a priority

Mobile payments alone, however, don’t make up the full picture. A factor essential to mPOS proliferation is the benefit it provides to merchants in addition to the enabling them to handle transactions without cash involvement. These value-added services create both an additional incentive for the initial adoption of an mPOS solution and continuing business advantages.

“If you look at the needs of the merchants, you’ll find that the ability to accept payments is important, but it’s not necessarily a deal breaker for them,” Daniel said.

“But over and beyond that, they have some challenges which mPOS is in a position to solve.”

These challenges cover a number of areas from attracting customers to growing a business. Through a partnership between mPOS providers and local payment aggregators, merchants can also provide customers with useful services such as bill payments for taxes, utilities and cable TV, as well as airtime top up for mobile phones, Daniel noted.

This creates an opportunity to increase sales and foot traffic – when people come into a store to pay a bill, there is also a chance they will also buy something.

An mPOS system also becomes an easy-to-manage system for generating financial records, which are an indispensable resource for businesses looking to grow – it is next to impossible for a business to obtain a loan without this information.

Ensuring a system for the future

One of the reasons why mPOS is ideally suited for the Nigerian market, as well as other economies, is that it is inherently adaptable to other technological developments. Because mPOS is paired with a smartphone, it is able to link up with applications to further increase its potential for innovation.

“Our vision for mPOS is that it is just a starting point of a conversation,”
Daniel said. “The main thing is understanding the market and trying to come up with a solution that meets the problem. And I think mPOS paired with the smart device does that. If you put the technology out there, the market will determine how best to use it.”